Telecoms Boost European Shares

European stocks had a V-shaped session on Wednesday, with corporate updates from firms including Peugeot, Deutsche Bank and PPR Group poorly received but defensive sectors advancing.

The pan-European Dow Jones Stoxx 600 index rose 0.4% to 249.29, up for the second time in four sessions.

Telecoms were strong in Europe, with shares of France Télécom up 1.9% and Deutsche Telekom shares up 2%. Shares of Swedish-based telecom Tele2 rose 5.1% in Stockholm after it said third-quarter profit doubled, helped by fewer charges, and was ahead of analysts' expectations.

"There is a tendency right now to start looking at [defensive] sectors," said Ad van Tiggelen, strategist at ING Investment Management. Defensive firms are seen as less tied to the wider economy than cyclical firms. "We especially like telecoms. They are cheap with a very high dividend yield and still decent growth. Utilities are also on the screen. They have been very out of favor," he said.

On a regional level, the French CAC-40 index rose 0.1% to 3873.22, the German DAX rose 0.4% to 5833.49 and the U.K. FTSE 100 index rose 0.3% to 5,257.85.

Tieto shares rose 8.9% in Helsinki. The IT services firm's operating profit declined but beat forecasts, Credit Suisse analysts said. "We are now in an intermediate phase where the cyclical rally has largely been played out but it's still too early to go straight into buying the defensive sectors as there is still too much momentum in cyclical earnings," said Mr. van Tiggelen. "So what we are doing is gradually taking profits in the cyclical sectors," he added.

However, autos struggled. Shares of PSA Peugeot Citroën fell 4.8% after it posted third-quarter revenue that disappointed analysts. The shares have risen 89% year-to-date. In Milan, Fiat shares dropped 2.4% after its third-quarter net income dropped 95% from last year.

In addition, the euro hit $1.50 against the dollar on Wednesday and was recently up 0.5% at $1.5009 Euro strength can be a hindrance to exporters in the euro zone but isn't always. "The reality is that these bigger companies have production units around the world. It tends to lack major impact on the large companies. It tends to be smaller companies that feel the impact due to the location of cost bases," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.

Banks have also had a strong run since March. Deutsche Bank fell 2.4% in Frankfurt, after a 94% year-to-date gain. The lender said it expects to report a third-quarter net profit of €1.4 billion ($2.09 billion), which would top analyst expectations for a profit of €802 million according to data compiled by FactSet. The vast majority of the beat was due to tax gains.

PPR Group shares fell 4% in Paris, after a 76% year-to-date rise. The owner of Fnac, Redcats, Conforama, CFAO, Puma and Gucci Group said third-quarter revenue fell 7.6% to €4.56 billion, a drop of 8% on a comparable basis.

Construction-sector stocks were also giving back some gains, with Ferrovial shares down 2.3%. The firm expects to book a €142 million loss from the sale of London's Gatwick airport to Global Infrastructure Partners.

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